Maxis is guilty of fraud

I was going to give you more on the PKFZ scandal, but had to waste countless hours since Saturday dealing with Max-sick and its clueless “technical support” personnel.

Yup, my Max-sick broadband is on the blink again. The problems started Friday, but I was still able to get a steady, albeit slow connection via EDGE technology. On Saturday, the line kept dropping. By Monday evening, Max-sick was dead. Cue countless calls to Max-sick's “customer service” and a home visit by an unskilled vendor who insisted it was a modem problem when I was 1000% sure it wasn't. True enough, he changed the modem and still there's no service.

Finally, yesterday (Tuesday) evening, someone called and said Max-sick had “escalated my problem up to the engineering team”. What? I had complained on Saturday!!! It takes them THREE days to “escalate” the problem? Whatever happened to service integrity? Internet connection is a necessity nowadays. I rely on it to work and earn income. No internet = pissed off customers and lost opportunities. Yet when I asked Max-sick if they are at least going to waive my monthly fee, they said “they have to close the file first”, whatever that means.

Maxis is guilty of fraud. It is charging for a service (broadband) which it is not delivering. It's like a travel agent selling you a 5-star holiday package including accommodation at the Shangri-la, but dumping you into Rumah Tumpangan Ah Fatt instead. Actually it's worse than that. Maxis is not delivering ANY service at all. So, Maxis charges us for 5-star hotels but leaves us sleeping in the streets. In the meantime, it has the gall to continue aggressively selling Broadband packages. I know because I was accosted yesterday evening by yet another Maxis vendor! Needless to say, I gave him a piece of my mind, telling him he was selling a non-existent service.

But we consumers are powerless. There is no choice. Streamyx is equally bad, and I doubt that Celcom Broadband can outperform its sister company. In a situation like this, it is the regulator that has to protect the consumer against rapacious large companies.

So, where is our regulator? Incompetent like much of the Barisan Nasional government. Sigh. Next elections are so far away. In the meantime, we are stuck with a government that the majority of peninsular Malaysians did not vote for. Please, fellow citizens in Sabah and Sarawak – next elections help us kick out this useless administration.

And in case you're wondering, I had to drive out, incurring petrol and parking expense and spending unnecessary time, to find a place with wi-fi so I could upload this.

Cost of PKFZ scandal – RM500 for every single Malaysian, and counting

I spent the morning at the Port Klang Authority with the DAP team, scrutinising the appendices to the Port Klang Free Zone (PKFZ) report that was made public yesterday. The experience was slightly better than when we checked out the toll concession agreements earlier this year. Nicely-printed main reports are available. The appendices though, are available for review for only 2 weeks, and restrictions apply – they cannot be photocopied or photographed. But we can take notes on our computers, which is a relief for people like me with scrawly hand-writing.

It is a mound of dirt, so I'm sure there'll be plenty of coverage by Kit Siang, Tony, et al. I'll just help with the background for starters:

The players are:
1) Port Klang Authority (PKA), a statutory body under the Ministry of Transport.
2) PKA decided to set up Port Klang Free Zone (PKFZ), an integrated 1,000 acre zone offering facilities for international cargo distribution.
3) To design, construct and finance PKFZ, private company Kumpulan Dimensi Sdn Bhd (KDSB) was appointed as the turnkey developer.

There are all sorts of conflict of interest and performance issues surrounding KDSB and its appointment which I shall leave to others to highlight. Moving on the the billions of ringgit that were lost and stand to be lost:

1) The cost originally estimated in 2001 was RM1.957bn for land and development works.
2) This had escalated to RM4.947bn as at 31 Dec 2008. (The cost for land and development works alone had jumped to RM3.522bn. In addition, because PKFZ had to borrow to fund the development, there was RM1.425bn of interest costs).
3) The Ministry of Finance (MoF) extended a soft loan of RM4.632bn to PKA to help fund PKFZ.
4) Even though the MoF loan is soft (on friendly terms), some interest still has to be paid. This works out to RM2.506bn, taking the total project cost to RM7.453bn.

So, as of 31 Dec 2008, the tax-payer was already down by over RM7bn! It gets worse:

1) Based on its own assumptions, Port Klang Authority will be in cumulative cash flow deficit for the next 42 years, until 2041. Put another way, PKA starts making money only in 2042.
2) PKA's assumptions, needless to say, appear overly-optimistic (email me if you want details).
3) The Reporting Accountants PricewaterhouseCoopers (PWC) say PKA will not be able to repay the Ministry of Finance the soft loans as scheduled, based on PKA's own (optimistic) assumptions. These loans will have to be restructured, leading to an additional RM5bn of interest costs.
4) So, ultimately, the total project will cost RM12.453bn. That’s RM500 for each and every one of us.
5) Bear in mind, the RM12.453bn estimate is based on PKA's optimistic assumptions.
6) If we make more realistic assumptions, the total cost will be much higher. I'm guess-timating RM20bn+!

So, where do we go from here? Speaking from a logical angle, the RM7.453bn total cost so far is gone and burnt. We must look forward. And looking forward, we're talking about a further loss of at least RM8.5bn, based on PKA's own optimistic assumptions. This is based on RM5bn just for project-financing (point 4 above) and, in addition, PKFZ is expected to burn another RM3.5bn of cash to finance its operating cash flow over 2008-2041.

Can the government walk away? Should the government walk away and save at least RM8.5bn? By the way, that RM8.5bn will go a long way to privatising PLUS!

How TIA can make a lasting impact

Here’s my prediction: By 2012, three years after the launch of the Terengganu Investment Authority (TIA), the average Terengganu citizen will be pretty much unaffected by the billions of ringgit spent. Ultimately, when the projects are completed, when the land-flippers and contractors have collected their millions and hundreds of thousands or ringgit, the rakyat will be left with only poorly-constructed, under-utilised buildings which start falling apart very quickly.

TIA is perpetuating the myth that all it takes to develop a nation is infrastructure. Just build fancy new buildings and we’ll achieve developed status! It’s not that simple. It has already been proven in Malaysia – building first-world infrastructure WILL NOT take us to first-world status. Developed status is also about the soft issues – education, culture, civil society ….

Putrajaya, KLIA and the KLCC Twin Towers are the best case studies. These were supposed to be icons of a developed Malaysia. Now, after barely ten years, Putrajaya is already crumbling and KLIA is beset with the same taxi touts and illegal parking problems that plagued Subang. The KLCC Twin Towers area, in an ironic way, has turned out to symbolize Malaysia. Within KLCC itself, swanky stores cater to rich tourists and the professional Malaysians engendered by the NEP, but just 50 metres outside, rogue taxi drivers over-charge with impunity and across the road along Jalan Ampang, poor itinerant traders set up shop in the evenings, cooking on make-shift stoves.

But perhaps I am wrong, and TIA will not just be a mega-project play. Let’s say TIA does attract serious oil and gas specialists to set up shop in Terengganu, spending billions on capital investment. How many Terengganu folk are actually qualified to work in those specialized, highly-technical fields? Households in Terengganu are the second-poorest in Malaysia. It will look a lot like the British days, when foreigners held the senior positions and locals had to be content with the low-level jobs.

TIA would make a much more meaningful and lasting impact on Terengganu if it starts from the ground up. Let’s start with education. Use the money to fund the best teachers and offer good facilities. Build the proficiency of Terengganu children in English, Math and Science. Educate the next generation of Terengganu. Only then, seek the high-value, highly-specialised industries, when Terengganu people themselves can take full advantage of the employment opportunities

More to come. I’m off now to Port Klang to view the report on the Port Klang Free Zone (PKFZ) debacle with your hard-working DAP MPs. This time, I hope I’m not again forced to go back to pen-and-paper.

TIA shaping up to be another mega-project ploy

The Terengganu Investment Authority (TIA) was well-covered by the weekend press, including the Star and the Edge Weekly. “Well-covered” in the sense of plenty of news pages being devoted to this RM11bn fund, which, by the way, is equivalent to ladening RM11,000 of debt on every single one of the 1million Terengganu folk!

Not surprisingly, hard, penetrating questions were rare. Like, “How exactly will the average Terengganu citizen benefit from all this?”

Based on the reported comments by CEO Sharol Azral Ibrahim Halmi and executive director of business development Casey Tan, TIA will be yet another launch pad for huge construction mega-projects that will benefit a few cronies, a few hundred Class-F contractors (want to bet they’ll mainly be UMNO-related?) and a few thousand, mainly foreign, construction workers.

Consider just two examples:
1) CEO Sharol said TIA is “taking a masterplan approach to build a resort with private villas and other amenities as well as retirement homes”. TIA will invest US$1.8bn and expects a foreign investor to match this sum. That works out to nearly RM13bn, which coincidentally is about the same sum reportedly frittered away in the Port Klang Free Zone debacle;

2) An even worse idea comes from Tang: “It will be a tourism play. The land will be acquired from the state and sold at a higher price to the master developer.” Hello? Land-flipping was a major issue at PKFZ. Influential private parties acquired land cheaply from the state and subsequently resold it at far higher prices. What the private party gains, the state loses – why can’t the state sell it at the higher price in the first place, and use the proceeds to fund state development. Why is TIA, a sovereign fund which aspires to best-practices, even considering this approach?

Coming full circle to my original question, after the land is bought and sold, after the spanking new buildings are constructed … how will the average Terengganu resident be better off?

More to come …

Terengganu’s ‘Sovereign Wealth Fund’ is anything but

“The country’s first state-established sovereign wealth fund, Terengganu Investment Authority (TIA), with an initial fund of RM11bil, has identified several high-impact investment projects in the tourism, energy and agriculture sectors in the state and around the country,” reports the Star today, Tuesday May 19.

Unfortunately, as with most financial-related topics associated with the Barisan Nasional (BN) government, there are far more questions than answers. Here are just three big ones, to start off with:

1) First, funding. TIA will reportedly raise RM5bn in bonds backed by a federal government guarantee. PM Najib reportedly said “There’s no money involved” (The Edge Daily, May 19). Hello? Has he been keeping up to-date on the multi-billion ringgit Klang Port scandal which involved dubiously granted government guarantees?

The bigger question though, is why TIA needs a government guarantee in the first place. TIA will also reportedly have RM6bn ‘raised through the assignment to TIA of some of the future oil royalties due to the state.” RM6bn is already a huge some of money to start off with. Why the rush to add RM5bn of federal government-guaranteed debt on top of that?

2) Second, objectives. TIA chief executive officer and former executive partner at Accenture, Shahrol Halmi said, “The key objectives of TIA’s investment strategy are … ensure the development of long-term sustainable economic and social programmes for the state.”

Elsewhere in the world, the whole point of sovereign wealth funds (SWFs) is to invest windfall gains from high resource prices wisely, OUTSIDE the home country. SWFs came about because resource-rich countries found that their own economies were too small to effectively deploy all the income coming in from their trade surpluses. Rather than have too much money chasing to few goods, leading to unproductive investments and domestic property price inflation, countries such as Norway chose to set up SWFs in order to effectively invest the money overseas for a rainy day.

Over here, TIA is proposing to invest within Terengganu. Yes, a major political issue is the people of oil-rich Terengganu do not appear to have reaped any benefits from record-high oil prices. But, that’s an issue with the BN federal and state government delivery mechanism. How does TIA fit in with the local government? In fact, the presence of TIA could actually deter investment by private investors, as it could be perceived that TIA will be given undue advantages. SWFs should have no business in their home countries!

3) Third, accountability. Media reports say TIA will have a “triple-tier check and balance system comprising the board of directors, a board of advisers and a senior management team.” I say a system is only as good as its people. Note that the board of advisers will include the Prime Minister or the Finance Minister, in his stead. Far better if politicians stay out completely and leave it to professionals.

Also, the best accountability is via public disclosure. Dare we hope that TIA will adopt best practices as per the Government Pension Fund of Norway? (Contrary to its name, this fund is entirely funded by surplus wealth from Norwegian petroleum income – no government guarantees! – and is professionally managed). I invite you to check their website. Information including ALL the shares held by the fund are available for quick and easy download!

I have other issues, including the so-called “experienced personnel” involved in running the fund. Right now, the list is very narrow and, by accident or design, seems to consist primarily of one ethnic group only. I know for a fact, having worked for MNCs, that financial services talent encompasses the entire globe from Caucasians to sub-continent Indians to mainland Chinese. If TIA truly intends to be world-class, its hiring policies need to be world-class too.

What about respect for the rakyat?

Perak Regent Raja Dr Nazrin Shah had to wait five hours to deliver his opening address to the Perak State Assembly due to the shenanigans last Thursday. As he was taking his seat, menteri besar, as reaffirmed by the High Court yesterday, Datuk Seri Mohd Nizar Jamaluddin requested to raise an objection on the forceful and illegal means employed by the Barisan Nasional to remove speaker V. Sivakumar.

The New Straits Times reported the Raja Muda then asked Nizar and the DAP’s Datuk Ngeh Koo Ham to approach him. The Raja Muda told the duo: “I don’t want to get involved in this. I just want to give my speech, so respect my speech, when I am giving it. You understand that? If you want to work with me in future, you have to respect my speech. Understand?
“So go and tell that." (to the Pakatan Rakyat state assemblymen)

The Raja Muda can demand respect due to his position as a constitutional monarch. Who will accord respect for the rakyat’s wishes? Only a minority of Perak folk voted for the Barisan Nasional. The majority of the people of Perak do not want a Barisan Nasional state government.

How have we come to the situation where the minority is allowed to rule over the majority? What does this say for the future of Malaysia? We took a huge step away from democracy last week. I fear we are on the path to kleptocracy. Dare I see a glimmer of hope following yesterday's court decision?

On ex-PMs becoming “advisors” …

Tun Abdullah Badawi is now advisor to Malaysia Airlines. The Malaysian Insider says “The Najib administration has manoeuvered around a potentially delicate situation … keeping Tun Dr Mahathir Mohamad as Petronas advisor.”

Apparently there is a “tradition” for a recently retired prime minister to be given the prestigious advisor position in the national oil company. This can’t be a long “tradition”. Petronas was formed only in the 1970s after our first prime minister Tunku Abdul Rahman had retired. Our second prime minister Tun Abdul Razak passed away in office. Tun Hussein Onn was the first such ex-PM “advisor”. And Tun M is the second.

I wonder why this “tradition” developed. The scope and terms of reference of these “advisors” has never been officially disclosed. It is less of an issue in the case of unlisted Petronas. But Malaysia Airlines is a public-listed company, with directors elected by shareholders. Where does Tun Abdullah sit in the overall scheme of corporate governance?

It would be wonderful if Tun Abdullah declines this ‘honour’ and nips this dubious “tradition” in the bud. Cushy GLC (government-linked corporate) positions should not become part of the expected retirement package for ex-PMs.

It would be far more meaningful if ex-PMs apply their influence to champion projects that benefit the ordinary rakyat. For instance, I am thinking of the Tun Hussein Onn Eye Hospital, a wonderful hospital that provides affordable specialist eye-care. Jeff Ooi was a very satisfied patient; and so was I.